You may have realized that you need to take out student loans to assist finance your education. Or maybe you have settled on student loan refinancing to assist you pay back the student loans you have already taken out. Either way, you have filled out the application, gotten approved, and now you will have loan options, including the choice between a fixed vs. variable rate. If you are already familiar with both, factors like changing interest rates and your financial situation will potentially have a bearing on which type of loan is right for you. Well, let us talk about those loan refinance rates
SoFi Student Loan Refinancing Rates & Terms
The following describes the APR, monthly payment and total payments during the life of a $10,000 private loan with a single disbursement. All student loan rates are shown with the Autopay Discount (0.25%). There are no application/ origination fees, no prepayment penalties as well.
For variable rate loans, the index rate now is 0.12%, and can change monthly. The current index for variable rate loans is derived from one-month LIBOR, so that changes in the LIBOR index can cause your monthly payment to increase. Generally, 5, 7, and 10 Year terms are capped at 8.95% APR. While 15 and 20 Year terms are capped at 9.95% APR. Your actual interest rate can be different from the student loan interest rates in these examples and also will be based on terms of loan, your financial history, and other factors, including your cosigner’s financial history. Also, State restrictions can apply.
Fixed Rate Loans
|Terms||Rate||Repayment APR||No. of Payments||Monthly Payment||Total Payments|
|5 Year||2.74% – 5.10%||2.74% – 5.10%||60||$178.53 – $189.17||$10,712.03 – $11,350.25|
|7 Year||3.49% – 5.50%||3.49% – 5.50%||84||$134.35 – $143.70||$11,285.65 – $12,070.84|
|10 Year||3.69% – 5.87%||3.69% – 5.87%||120||$99.78 – $110.37||$11,973.41 – $13,244.26|
|15 Year||3.91% – 5.82%||3.91% – 5.82%||180||$73.52 – $83.42||$13,233.35 – $15,014.94|
|20 Year||4.23% – 6.74%||4.23% – 6.74%||240||$61.82 – $75.98||$14,836.04 – $18,234.47|
Variable Rate Loans
|Terms||Rate||Repayment APR||No. of Payments||Monthly Payment||
|5 Year||2.27% – 4.67%||2.27% – 4.67%||60||$176.46 – $187.20||$10,587.68 – $11,232.25|
|7 Year||3.51% – 5.07%||3.51% – 5.07%||84||$134.44 – $141.67||$11,293.30 – $11,900.13|
|10 Year||3.71% – 5.44%||3.71% – 5.44%||120||$99.87 – $108.23||$11,984.71 – $12,987.51|
|15 Year||3.93% – 5.39%||3.93% – 5.39%||180||$73.62 – $81.13||$13,251.33 – $14,602.64|
|20 Year||4.25% – 6.39%||4.25% – 6.39%||240||$61.92 – $73.91||$14,861.63 – $17,738.67|
About Fixed Rate Student Loans
The fixed-rate student loans have a locked-in interest rate for the entire loan term. It means that the interest rate you have when you take out the loan is going to be the same rate you have at the end of the term. The only method you can change this interest rate is if you refinance your student loans with a private lender or consolidate them through the government. Usually, fixed-rate student loans are considered the safer option as there is no chance your interest rate can rise. All federal student loans have fixed interest rates which are set by Congress each year, so no matter which federal loan you qualify for, your interest rate will not be able to change over the life of the loan.
Of course, each type of federal loan is going to have its own fixed interest rate. For instance, Direct Plus Loans have a different fixed interest rate than Direct Unsubsidized Loans. You are able to check the current federal loan fixed interest rates. On the other hand, Private student loans are able to have either fixed or variable rates.
Pros of Fixed Rate Loans:
- They are not affected by interest rate changes.
- They charge the same interest rate over the life of loan.
- Your monthly payments are going to stay the same, unless you increase them yourself.
Cons of Fixed Rate Loans
- Usually, they have a higher interest rate than variable rate student loans.
- You can potentially miss out on savings if variable rates drop lower than your rate.
About Variable Rate Loans
As we explained above, all federal student loans have fixed interest rates. So, you only have the option to select a variable rate student loan with a private lender. Even though variable rate student loans have a lower interest rate to begin with, they are also riskier. It is because the interest rate on a variable rate loan may change (increase or decrease) throughout the life of the loan based on how the market performs (at any given time). While it may be a good thing if the interest rate goes lower than the original rate, there is also a possibility that the interest rate will rise higher. So, how do the lenders select the rates? Usually, private student loan lenders base the interest rates off of the interest rate indices.
It can be a good idea to ask your lender how often your interest rate will change. Each lender has their way of adjusting rates. Also, you are able to ask if there is a cap on the rate, some lenders are going to implement a cap so that a variable-rate cannot exceed a certain percentage.
Pros of Variable Rate Loans:
- Usually, they have a lower initial rate than fixed-rate loans.
- They are able to be a good option if you can qualify for a low-interest rate and are on track to pay off your student loans quickly.
- You can potentially save money if the interest rate drops.
Cons of Variable Rate Loans:
- They are affected by interest rate changes, so your loan’s rate may go up or down on a monthly or annual basis.
- Your monthly payment cannot remain stable, and can increase or decrease depending on the market.
- Monthly payments are not predictable, as they are able to increase or decrease as the rate changes.
- For those paying their loan off on a fairly long timeline, their interest rate has more time to go up, that can cost the borrower more in interest over the life of the loan.